As the Federal Reserve prepares to stop trimming its $4 trillion balance sheet later this year, two U.S. central bankers suggested the Fed may need to carefully feel its way on how big its bond portfolio needs to be to maintain smoothly operating financial markets. In minutes of its January policy-setting meeting released earlier this week, the Fed surprised markets by saying it had discussed ending a reduction of its balance sheet later this year. Doing so would leave the Fed’s balance sheet, swollen from years of bond-buying in the post-crisis years, much bigger than had earlier been anticipated. On Friday, Fed ... (full story)